6 Battery Road
by Professor Ian H. Giddy
New York University
Please examine the terms of the deal described below.
What is the nature of the options given to the investor, and what are
|DBS BANK LAUNCHES THE LARGEST
BOND IPO WITH THE SECURITISATION OF 6 BATTERY ROAD
|In conjunction with the securitisation
of 6 Battery Road (the "Building") by DBS Land, Clover Holdings Limited
("Clover"), a special purpose vehicle, will issue S$878,000,000 10-year
fixed rate Bonds together with 87,800 Preference Shares to purchase the
Building, valued at S$835,000,000, and cash of S$43,000,000 which will
be used to fund future upgrading works of the Building. Every S$10,000
bonds will come with one Preference Share of S$0.10 each. The Bond Issue
will comprise S$550,000,000 of Senior Bonds and S$328,000,000 of Junior
|DBS Bank, the Manager of the Issue,
will make available S$50,000,000 Senior Bonds to retail investors. The
retail offering will be the largest Bond IPO in Singapore. Said Mr Eric
Ang, the Managing Director and Head of Capital Markets at DBS Bank "We
have increased the retail tranche in response to the strong demand from
retail investors for Bond IPOs. Our previous 5 issues were sold out within
hours. Clearly the investing public is looking for higher yielding alternatives
to fixed deposits in Singapore."
|In a conscious effort to satisfy
demand, DBS Bank has also introduced a clawback feature to increase the
size of the retail tranche from S$50,000,000 to up to S$100,000,000 if
retail demand remains unsatisfied.
"The clawback gives us the flexibility to increase the size by up to
S$50,000,000 if demand for this issue is as overwhelming as our previous
issues" said Mr Eric Ang. If the clawback is exercised, the placement tranche
of the Senior Bonds will be reduced accordingly.
|The Senior Bonds will be offered
at S$1 per unit (in multiples of 10,000 units and subject to a maximum
of 1,000,000 units per investor). The Coupon on the Senior Bonds is 6%
per annum payable semi-annually. The Junior Bonds will be taken up by DBS
Land. In addition to the regular interest payments of 6% per annum, bondholders
will be entitled to a share of any potential gains arising from the sale
of the Building. This will either be distributed as a special preferential
dividend or as a premium on the bonds at redemption.
|The Bonds will be offered exclusively
through DBS Bank and POSBank ATMs on a first-come-first-served basis from
Wednesday, 8 December 1999 (9.30 am) to Tuesday, 14 December 1999 (12.00
noon) or immediately upon full subscription, whichever is earlier.
|Like previous issues, this issue
has a number of credit enhancements which make it superior to straight
bonds. First, the Issuer, Clover, has no other indebtedness or liabilities
besides the bond issue. Second, the bonds will have the Building as collateral.
Third, the Senior bondholders have a security buffer of 34% as they rank
ahead of Junior bondholders (only the Senior Bonds are offered to investors
in this offering). This means that any fall in the current value of the
Building will not affect the retail investors' principal amount unless
the fall is more than 34% of the Building's current value. Fourth, the
Issuer has an assured cashflow to service the interest payments. Finally,
bondholders have an option of an early redemption in the 8th and 9th years,
providing a window of two years to cash out if market conditions decline.
Bondholders, holding not less than 35 per cent. in aggregate principal
amount of the Bonds, could request Clover to redeem the Bonds.
|6 Battery Road is a 999-year leasehold,
42-storey Grade A office building located in the heart of the Central Business
District at Raffles Place.
|The Bonds can be transacted at the
Singapore Exchange Securities Trading Limited or at DBS Bank branches.
Details of the Issue are found in the Prospectus, which are available at
all DBS and POSBank branches.
|DBS Bank has been very active in
the development of the debt capital market in Singapore and will continue
to promote fixed income investments to retail investors.
Copyright 1999 by DBS Bank.